The following is a general guide to purchasing new and resale property in Spain. However, this guide does not attempt to cover all the legal and financial points and prospective purchasers are recommended to seek professional advice.
As in many E.U. countries property in Spain is registered on a property register.
The Contract
When you have decided upon the property to purchase, the agreement will normally be contained in a private contract. The document should contain details of the agreed purchase price; payment of a deposit; provision for payment of the balance of the purchase monies; any extras that you have agreed to purchase and the intended date for completion together with all other relevant terms and conditions.
Once you have paid your deposit (usually 10%) there is then a binding agreement between both Seller and Buyer. A specific agreement (called arras) may be entered into between Seller and Buyer, where either party may rescind the contract, the Seller returning double the deposit or the Buyer losing the deposit.
The Community of Owners
When there is common ownership or sharing of facilities between owners, in every development in Spain a Community of Owners must be established through which community charges can be shared. If your development is contained in an apartment block then the law is that relating to the Horizontal Division ("Ley de la Propiedad Horizontal").
Conveyance (Escritura de Compraventa)
The sale and purchase of all property in Spain requires to be registered in the Land Registry. They maintain details of the property and record financial charges and other matters which may affect the title. The Notary - el Notario - prepares the Conveyance - la Escritura. He will check compliance with Spanish law. However, the Notary does not check the title to the property, although he will make a check at the Land Registry immediately prior to the signing of the Escritura to ensure that there are no undisclosed charges on the property.
Once the formalities have been completed before the Notary, the Escritura Pública must be delivered to the Land Registry for title to be recorded in the Registry of Property - Registro de la Propiedad. Before doing so, however, it is necessary to ensure that all taxes have been paid.
Purchase price
There has been a custom for many years to understate the sale and purchase price enabling the Vendor to reduce his tax liability. You may also be told this will reduce your initial outgoings by a saving in stamp duty. If this procedure is adopted you must realise that when the property is sold and the actual price then declared you will be liable to pay Capital Gains Tax on the additional profit. Obviously if the purchase price was understated the Capital Gains Tax will be higher.
For non-residents of Spain,a deduction of 3% must be made by the purchaser from the sale proceeds and deposited with the tax office pending agreement of the capital gain.
The total expenses incurred in the purchase should not, on average amount to between 10 and 12% of the purchase price. The individual expenses and fees are as follows:
Stamp Duty (Transfer Tax)
You will be required to pay at the appropriate rate of stamp duty based on the price set out on the Escritura. the rate varies from 5% to 7% depending on the area of Spain where the property is located.
In the case of land purchase or a new construction VAT will be payable.
Land Registry Fees
The fees of the Property Registrar for registering your Escritura in the Register will be assessed on a scale fee related to the Escritura value.
Plus Valia
This tax is paid to the Local Authority and is a form of Capital Gains Tax that is payable on the notional increase in value of the land since the last purchase. It should be stressed that this tax is based on the increase in value of the land, and not on any buildings erected upon it. The obligation to pay this tax falls upon the Seller.
Notarial Fees
A fee is charged by the Notary to prepare and legalise the Escritura. This is also a scale fee based on the declared value.
Legal Costs
Our estimate will be based on the true value of the property and the complexity of the work to be done. As a general guide, where Cornish & Co are instructed we would normally expect the legal costs for the purchase to be in the region of 1% of the purchase price,plus any additional fees and disbursements that arise. There is a minimum fee that we charge, depending upon whether you are buying a re-sale or new property. However, in advance of receiving instructions, we will always provide you with a detailed estimate of the costs and disbursements that are likely to arise in the proposed transaction.
You are advised to make a Spanish Will to cover your Spanish estate. Whilst a foreign Will is recognised this may lead to delays and prove more costly in the long run. Wills in Spain are usually drawn up by a lawyer and executed before a Notary.
Our Spanish Conveyancing Departmentt has been established for more than 20 years so we know the problems a purchaser faces and how to resolve them. We will communicate with you in everyday language and remove the problems of having to cope with a legal system that is unfamiliar to you.
Being aware of the Purchaser's problems we have established a Spanish Conveyancing Department to help overcome this. We will communicate in everyday language and remove the problems of having to cope with a legal system that is unfamiliar to you. We can also provide you with advice and assistance on various matters in the following ways:
Title
Tax and Inheritance advice
Spanish Wills,
Obtaining of a Fiscal Identification Number (NIE)
Filing the Annual Spanish Income Tax and Wealth Tax Returns